Logistical Improvements, Manufacturing Sector, 1960s to 2010s

Logistical Improvements, Manufacturing Sector, 1960s to 2010s

Source: Adapted from Logistics Management & Distribution.

Manufacturing has become an increasingly efficient and cost-effective activity. A share of these improvements can be linked with productivity improvements such as for labor (e.g. outsourcing or offshoring) and capital (e.g. equipment). Another share is linked with the improvement of the supply chains and the logistics supporting manufacturing.

While cycle time requirements substantially decreased from the 1960s through the 1980s (from more than a month to one week), this came at the expense of growing logistics costs, notably inventory costs. From that point, the major achievements were related to productivity gains in distribution, accompanied by a reduction of cycle time requirements, but as importantly, of inventory costs. In some highly efficient facilities, the warehousing function went down as far as 15 minutes’ worth of parts in inventory, but this is still more the exception than the rule.

The retail sector was also experiencing a diffusion of logistical management where inventory in stores is kept at a minimum and re-supplied daily. Logistics remains a balancing act, which is supply chain specific, between the level of responsiveness of production (cycle time) and the level of responsiveness of distribution, notably inventory levels to be maintained to meet the customers’ orders (lead time). High inventory levels enable responding to orders quickly (low lead time) but at a higher cost.